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Payment For Start-ups: What You Need To Know

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The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedDec 20212 min read

Your start-up is almost ready to start trading. Your team is well-trained, your product is ready for market, and your launch strategy is in motion. You understand the perils and pitfalls that you’ll face in your all-important first year, like maintaining healthy cash flow. You understand the importance of retaining customers. But before your launch, you need to ponder this question.

How will you get paid?

The answer isn’t as simple as you may think. Whether you conduct business online or in a brick-and-mortar premises, you’ll need to have a payment solution set up to ensure secure and frictionless payments from your clientele. Here, we’ll look at everything you need to know about payment for your start-up.

What is a payment solution?

There was a time when most business transactions involved only cash. In the digital age, however, there are all manner of software solutions competing for market dominance. This is good for start-ups because it affords them a wealth of choice. But they can be bamboozling for newcomers.

Payment gateways, payment processors and merchant accounts

Conventional payment solutions are made up of three components — payment gateways, payment processors, and merchant accounts.

Let’s take a look at each of these in greater detail:

Merchant accounts — These are separate bank accounts that enable you to accept payments via credit and debit card.

Payment gateways — Payment gateways act as an intermediary between your online store (where payment is made) and your merchant account (where the payment ends up). Think of them as the digital equivalent of on-site POS machines.

Payment processors — These are the companies responsible for managing the flow of data between banks and card providers in order to facilitate the transaction. There are two types of payment processors. Front-end processors provide authorisation and settlement services to merchants and their banks. Back-end processors take the settlements from their front-end counterparts and move the funds from the issuing bank to the merchant bank.

What should start-ups look for in a payment solution?

With all manner of third-party companies offering their own payment solutions, how do you know which is the best fit for your start-up? The best place to start is by clarifying what your start-up needs from its payment solution.

Here are some of the things you should look for when choosing a payment solution.

Affordability

Some payment processors like Worldpay will charge a monthly fee, while others will charge a percentage (usually between 2 and 3 per cent) on the value of each transaction. Be wary of the impact that this can have on your profit margins in your early days.

Flexibility

Will the payment processor keep you bound to a lengthy contract? This may cause problems if you find that the payment gateway doesn’t meet your needs. Look for a solution that offers flexibility and scalability to meet the changing needs of your business.

Ease of use and integration

Look for a payment solution that’s easy to integrate into both your website and your business operations. It should be frictionless to use, both for you and the customer.

Security and compliance

The last thing your fledgling start-up needs is to become embroiled in a compliance issue. Or to be the target of cybercriminals. Both can cause serious damage to your start-up’s reputation. Choose a payment processor that is PCI compliant and offers robust security assurances.

We can help

If you’re interested in finding out more about payment processing solutions for start-ups, then get in touch with our financial experts. Discover how GoCardless can help you with ad hoc payments or recurring payments.